2023.
6. 9. SMIT Research and Business Foundation
Default Option for Retirement Pension (Pre-Designated Management System)
โThe key to introducing the default option is the pre-designated management system, which reflects the reporting of regulatory changes at the workplace.โ
Starting from July 12, 2022, the default option (pre-designated management system) has been introduced into the retirement pension IRP/DC system. The grace period for this system ends on July 11, 2023. Companies with DC plans must report changes to the retirement pension regulations to include the default option, allowing participants to select their default options.
Summary
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A new management system (default option) has been introduced in the DC retirement pension, and the law has been amended.
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The Industry-Academia Cooperation Foundation must reflect the changes and report the amendment to the retirement pension (DC) regulations by June 2023.
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Regulatory changes require the consent of more than half of the employees. (Requests will be sent through messages from the Industrial Bank.)
What is the Pre-Designated Management System (Default Option)?
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If an employee does not decide on the financial product for managing their retirement pension (DC or IRP) contributions, after a certain period, the contributions will automatically be managed according to the pre-designated method (with consent).
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Only products with a maturity date (like time deposits) are subject to this; products without a maturity date (like funds or ETFs) do not apply.
Why Introduce the Default Option?
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To ensure effective management of retirement pensions and enhance yields, contributing to the security of workers' benefits and increasing retirement income.
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If the Industry-Academia Cooperation Foundation fails to implement the default option, the Ministry of Employment and Labor can issue corrective orders and impose a fine of 5 million won.
โป The amendment to the Employee Retirement Benefit Security Act passed the National Assembly (December 9, 2021) and is effective from July 12, 2022.
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Article 19, Paragraph 1, Item 4-2 of the Employee Retirement Benefit Security Act: Matters related to the pre-designated management system (default option system) must be reflected in the retirement pension regulations with the consent of employee representatives (to be reflected within one year of the law coming into effect).
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Implementation deadline: July 11, 2023.
